Carbon Regulation: Time for America to Learn from Australia’s Mistake

Christina Baworowsky / September 23, 2013

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Australia’s new Prime Minister Tony Abbott, who won a landslide victory earlier this month, vowed to promptly scrap the nation’s tax on carbon emissions. He began to follow through at his first cabinet meeting. Also in line to be repealed are several commissions organized by the previous government to provide carbon pricing and emissions analysis and administer billions of dollars in subsidies to renewable energy companies.

After its implementation, the tax became overwhelmingly unpopular. The tax on big emitters, such as factories and power plants, started at AU$23 per metric ton of carbon dioxide produced and was increased to AU$24.15 per metric ton in July 2013, as required by the law. The trouble is that this tax had a large ripple effect on more than just big businesses.

The Institute for Energy Research’s recent report Australia’s Carbon Tax: An Economic Evaluation shows the practical economic shortcomings of the Australian carbon tax:

• Household electricity prices rose 15 percent within a year of the tax’s introduction. Nineteen percent of typical Australian household’s energy bill is due to the carbon tax or other related green programs.
• Since the implementation of the carbon tax, the number of unemployed workers has increased by more than 10 percent. Because Australia’s exports are relatively emission-intensive, the practical result is a tax on exports.
• Despite the carbon tax, carbon dioxide emissions have increased in Australia and will continue to increase until 2043, according to the government.

While Australian voters have come to the conclusion that the carbon tax has got to go, American politicians continue to offer it as a viable solution to global warming and the national debt. In fact, climate data does not demonstrate that global warming is a problem or explain how sensitive the climate is to carbon dioxide emissions. The national debt is the result of a spending problem, not a revenue problem. Heritage analysis of one such plan anticipates that a carbon tax in America, as in Australia, would damage the economy and have little to no environmental impact:

• A family of four would lose more than $1,000 of income per year;
• Over 400,000 jobs would be lost by 2016;
• Gasoline prices would rise $0.20 by 2016 and $0.30 before 2030; and
• Electricity prices would rise 20 percent by 2017 and more than 30 percent by 2030.

Though it seems promising that Australians will cut their losses by ending the tax, there is no way to undo all the damage that was done to Australian businesses and individuals. American politicians should take this as an opportunity to avoid such a loss altogether and prevent President Obama from working around Congress to implement his own climate agenda.

Christina Baworowsky is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please click here.